-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, BEafVI2BAoOU0XG9PyFvYCTBcmM5mPtSfhQ0/eqE2K+rt67zMeNHefJ/DxSM8zAL qISCLyRUxR3R4pSq9gDP2Q== 0000828990-96-000002.txt : 19960531 0000828990-96-000002.hdr.sgml : 19960531 ACCESSION NUMBER: 0000828990-96-000002 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960530 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: HIGH YIELD PLUS FUND INC CENTRAL INDEX KEY: 0000828990 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] STATE OF INCORPORATION: MD FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-05468 FILM NUMBER: 96574492 BUSINESS ADDRESS: STREET 1: 199 WATER ST CITY: NEW YORK STATE: NY ZIP: 10292 BUSINESS PHONE: 2122141250 MAIL ADDRESS: STREET 1: ONE SEAPORT PLAZA CITY: NEW YORK STATE: NY ZIP: 10292 N-30D 1 HIGH YIELD PLUS FUND, INC. ANNUAL REPORT March 31, 1996 The High Yield Plus Fund, Inc. (LOGO) Letter To Shareholders April 9, 1996 Dear Shareholder: The high yield market enjoyed a fairly robust year during the twelve months ended March 31, 1996. Market strength was driven by a combination of strong investor demand for high yield securities, a generally positive interest rate environment, and a modestly growing economy. While the key concern of the high yield marketplace last fall was the risk that a recession was likely during 1996, the most recent releases of economic statistics would indicate that the economy may be brighter than expected. As a result, while the Treasury bond market had rallied in the December quarter of the year given expectations that the Federal Reserve Board would be forced to cut short term rates in 1996, the overall market has now reversed itself, and interest rates have increased quite sharply since the first of the year. The high yield market is to some degree trapped between dueling expectations: it is a clear positive from a fundamental credit perspective to have a healthy economy; however, as interest rates increase, demand for high yield securities (and other fixed income securities) is apt to decrease. Mutual fund inflows, which were a buoyant driver of demand during 1995, may weaken or even become negative if interest rates continue to increase. If this shift in flows transpires, the high yield market would be negatively affected, at least from a short-term perspective. With respect to our investment strategy, we continue to target those issuers that offer the potential for improved financial prospects, either through internal growth or debt reduction strategies that should occur irrespective of broader economic trends. The Fund's total return was as follows for the periods ended March 31, 1996. We have also provided the returns of the Lipper Closed-End Leveraged High Yield category, an average of 19 closed-end high yield funds; we would note that the degree of leverage varies substantially amongst the funds in the group. Investment Objective The Fund seeks high current income by invest-ing in a portfolio of high yield debt securities. Capital appreciation is a secondary objective. TOTAL RETURNS As of 3/31/96
6 Months 12 Months 24 Months HYP 6.5% 18.7% 23.9% Lipper CELHY 6.4% 16.6% 20.0%
As of March 31, 1996, the Fund's total invested assets of $110 million represented 116% of the Fund's net assets of $94 million. Total borrowings were $17 million, a decrease of $2 million from March 31, 1995. The yield to maturity, average years to maturity and duration were 10.1%, 8.6 years and 5.2 years respectively as of March 31, 1996. This compares to 11.3%, 8.5 years and 5.5 years respectively as of March 31, 1995. Average ratings have remained steady at B1/B+. Some of the Portfolio's larger holdings include securities of Fort Howard Paper Corp., the leading US manufacturer of commercial tissue paper; Sweetheart Cup, Inc., a major producer of disposable food containers; K & F Industries, Inc., the leading manufacturer of aircraft braking systems; Young Broadcasting, Inc., a rapidly growing operator of network television stations; and Container Corporation of America, a significant producer of containerboard and other paper/packaging products. 1 Stock Listing The High Yield Plus Fund, Inc.'s common stock is traded onthe New York Stock Exchange under the symbol "HYP" and is frequently listed as "HighYld-PlsFd" in the financial sections of newspapers. It is also listed in a closed-end fund table every Monday in The Wall Street Journal. The Fund's shares closed the period at $8.75 per share. This price reflected a premium of 3.7% to the Fund's net asset value of $8.44 per share. The monthly dividend of $0.07 per share ($0.84 per share annualized) equates to a yield of 9.6% on the closing stock price. For comparison, this dividend yield was 330 basis points in excess of the 10-year Treasury Bond yield as of March 31, 1996. The dividend rate is reviewed by the Board of Directors and is subject to change based upon market conditions; past performance is not indicative of future results. Thank you for your interest in the Fund, and we look forward to continuing the Fund's investment program. Sincerely yours, Catherine A. Smith Portfolio Manager Senior Vice President Wellington Management Company 2 Portfolio of Investments as of March 31, 1996 THE HIGH YIELD PLUS FUND, INC. - --------------------------------------------------------------------------------
Moody's Principal Rating Interest Maturity Amount Value Description (Unaudited) Rate Date (000) (Note 1) - ----------------------------------------------------------------------------- - ------------------------------------------------- LONG-TERM INVESTMENTS--116.1% CORPORATE BONDS--112.3% - ----------------------------------------------------------------------------- - ------------------------------------------------- Aerospace/Defense--9.1% Howmet Corp., Sr. Sub. Notes B3 10.00% 12/01/03 $ 1,500 $ 1,563,750 K & F Industries, Inc., Sr. Sec. Notes B1 11.875 12/01/03 350 379,750 Sr. Sub. Deb. B2 13.75 8/01/01 2,143 2,228,720 Northrop Grumman Corp., Sr. Deb. Baa3 9.375 10/15/24 525 567,641 Rohr, Inc., Sr. Notes Ba3 11.625 5/15/03 1,250 1,387,500 Sabreliner Corp., Sr. Notes, Ser. B B2 12.50 4/15/03 625@ 592,187 Wyman Gordon Co., Sr. Notes B1 10.75 3/15/03 1,750 1,855,000 ------------ 8,574,548 - ----------------------------------------------------------------------------- - ------------------------------------------------- Basic Industries--23.9% American Standard, Inc., Sr. Deb. Ba3 11.375 5/15/04 250 272,500 Sr. Sub. Deb., Zero Coupon, (until 6/1/98) B1 10.50 6/01/05 2,000 1,705,000 Bell & Howell Co., Sr. Disc. Deb., Ser. B, Zero Coupon, (until 3/1/00) B3 11.50 3/01/05 1,870 1,215,500 Sr. Notes B1 9.25 7/15/00 750 765,000 Cabot Safety Acquisition Corp., Sr. Sub. Notes B3 12.50 7/15/05 750 830,625 Calmar Inc., Sr. Sub. Notes, Ser. B B3 11.50 8/15/05 950 950,000 Coltec Industries, Sr. Notes B1 9.75 4/01/00 900 918,000 Companhia Vale do Rio Doce, Notes, (Brazil) Ba3 10.00 4/2/04 750D 755,625 Dominion Textile USA, Inc., Sr. Notes Ba2 8.875 11/01/03 350 343,000 Sr. Notes Ba2 9.25 4/01/06 435 435,000 Envirosource, Inc., Sr. Notes B3 9.75 6/15/03 850 765,000 Essex Group, Inc., Sr. Notes B1 10.00 5/01/03 1,000 1,010,000 Exide Corp., Sr. Notes B1 10.75 12/15/02 350 359,625 Sr. Notes B1 10.00 4/15/05 500 508,750 Graphic Controls Corp., Sr. Sub. Notes, Ser. A B3 12.00 9/15/05 500 532,500 Great Lakes Carbon Corp., Sr. Sec. Notes Ba3 10.00 1/01/06 1,000 1,025,000 Haynes International Inc., Sr. Sub. Notes Ca 13.50 8/15/99 750 712,500 IDEX Corp., Sr. Sub. Notes, Ba3 9.75 9/15/02 250 261,250 Interlake Corp., Sr. Notes B2 12.00 11/15/01 250 255,000 Sr. Sub. Deb. B3 12.125 3/01/02 1,150 1,072,375
- -------------------------------------------------------------------------------- See Notes to Financial Statements. 3 Portfolio of Investments as of March 31, 1996 THE HIGH YIELD PLUS FUND, INC. - --------------------------------------------------------------------------------
Moody's Principal Rating Interest Maturity Amount Value Description (Unaudited) Rate Date (000) (Note 1) - ----------------------------------------------------------------------------- - ------------------------------------------------- Basic Industries (cont'd.) Lear Seating Corp., Sr. Sub. Notes B1 11.25% 7/15/00 $ 500 $ 520,000 Sub. Notes B2 8.25 2/01/02 750 720,000 Lone Star Industries, Inc., Sr. Notes NR 10.00 7/31/03 117 118,316 Overhead Door Corp., Sr. Notes B1 12.25 2/01/00 1,000 980,000 Penda Corp., Sr. Notes, Ser. B B2 10.75 3/01/04 750 630,000 Portola Packaging Inc., Sr. Notes B2 10.75 10/01/05 250 262,500 Silgan Holdings, Inc., Sr. Deb., Zero Coupon, (until 6/15/96) B3 13.25 12/15/02 785 769,300 Specialty Equipment Cos. Inc., Sr. Sub. Notes B3 11.375 12/01/03 1,000 1,047,500 Thermadyne Holdings Corp., Sr. Notes B3 10.25 5/01/02 750 753,750 Ucar Global Enterprises Inc., Sr. Sub. Notes B2 12.00 1/15/05 415 477,250 Walbro Corp., Sr. Notes, Ser. B Ba3 9.875 7/15/05 750 765,000 Westinghouse Electric Corp., Sr. Notes Ba1 8.875 6/01/01 425 439,633 Sr. Notes Ba1 8.375 6/15/02 300 305,235 ------------ 22,480,734 - ----------------------------------------------------------------------------- - ------------------------------------------------- Cable--6.7% Cablevision Industries Corp., Sr. Deb., Ser. B Ba2 9.25 4/01/08 500 540,000 Cablevision Systems Corp., Sr. Sub. Notes B2 9.25 11/01/05 1,000 1,000,000 Comcast Corp., Sr. Sub. Deb. B1 9.375 5/15/05 400 404,000 Sr. Sub. Deb. B1 9.125 10/15/06 750 746,250 Continental Cablevision, Inc., Sr. Deb. Ba2 9.00 9/01/08 250 270,000 Sr. Sub. Deb. B1 11.00 6/01/07 450 513,000 Marcus Cable Operating Co., L.P., Sr. Disc. Notes, Zero Coupon, (until 2/1/00) B3 13.50 8/01/04 500 362,500 Sr. Sub. Notes, Zero Coupon, (until 6/15/00) Caa 14.25 12/15/05 250 160,000 Tele Communications Inc., Sr. Deb. Baa3 9.25 1/15/23 1,250 1,298,687 Videotron Ltd., Sr. Sub. Notes, (Canada) Ba3 10.25 10/15/02 1,000 D 1,035,000 ------------ 6,329,437 - ----------------------------------------------------------------------------- - ------------------------------------------------- Chemicals--3.0% Agriculture Minerals & Chemicals, Inc., Sr. Notes Ba3 10.75 9/30/03 500 542,500 Arcadian Partners L.P., Sr. Notes, Ser. B B2 10.75 5/01/05 1,000 1,087,500 General Chemical Corp., Sr. Sub. Notes B2 9.25 8/15/03 500 502,500 Rexene Corp., Sr. Notes B1 11.75 12/01/04 215 222,525 Sherritt, Inc., Deb. B1 10.50 3/31/14 450 500,063 ------------ 2,855,088
- -------------------------------------------------------------------------------- 4 See Notes to Financial Statements. Portfolio of Investments as of March 31, 1996 THE HIGH YIELD PLUS FUND, INC. - --------------------------------------------------------------------------------
Moody's Principal Rating Interest Maturity Amount Value Description (Unaudited) Rate Date (000) (Note 1) - ----------------------------------------------------------------------------- - ------------------------------------------------- Computers & Electrical Equipment--1.3% Digital Equipment Corp., Deb. Ba1 7.75% 4/01/23 $ 750 $ 683,062 Unisys Corp., Sr. Notes NR 12.00 4/15/03 525 522,047 ------------ 1,205,109 - ----------------------------------------------------------------------------- - ------------------------------------------------- Consumer Goods & Services--5.8% American Safety Razor Co., Sr. Notes, Ser. B B1 9.875 8/01/05 500 513,125 Ekco Group Inc., Sr. Notes NR 9.25 4/01/06 675 684,281 Gruma S.A. de C.V., Notes, (Mexico) NR 9.75 3/09/98 700D 696,500 Sweetheart Cup, Inc., Sr. Sub. Notes B2 10.50 9/01/03 2,750 2,805,000 Westpoint Stevens, Inc., Sr. Notes B1 8.75 12/15/01 750 748,125 ------------ 5,447,031 - ----------------------------------------------------------------------------- - ------------------------------------------------- Energy & Related Goods & Services--6.4% Energy Ventures Inc., Sr. Notes B1 10.25 3/15/04 750 786,563 Global Marine, Inc., Sr. Sec. Notes B1 12.75 12/15/99 250 275,000 Oryx Energy Co., Ba3 8.125 10/15/05 725 709,550 Plains Resources Inc., Sr. Sub. Notes B2 12.00 10/01/99 500 530,000 Sr. Sub. Notes B2 10.25 3/15/06 640 644,800 Santa Fe Energy Resources, Inc., Sr. Sub. Deb. B1 11.00 5/15/04 1,250 1,343,750 Seagull Energy Corp., Sr. Sub. Notes B2 8.625 8/01/05 500 480,000 Transportadora De Gas, Medium-Term Notes, (Argentina) B1 7.75 12/23/98 350D 334,250 YPF Sociedad Anonima, Unsec'd. Notes, (Argentina) B1 8.00 2/15/04 1,000D 887,500 ------------ 5,991,413 - ----------------------------------------------------------------------------- - ------------------------------------------------- Financial Services--3.0% Dime Bancorp, Inc., Sr. Notes Ba3 10.50 11/15/05 1,250 1,375,000 Firstfed Financial Corp., Notes B2 11.75 10/01/04 500 475,000 Imperial Credit Industries, Inc., Sr. Notes B1 9.75 1/15/04 1,000 940,000 ------------ 2,790,000 - ----------------------------------------------------------------------------- - ------------------------------------------------- Food & Lodging--3.1% ARA Services, Inc., Sr. Notes Ba1 10.625 8/01/00 500 553,750 La Quinta Motor Inns, Inc., Sr. Sub. Notes Ba3 9.25 5/15/03 1,000 1,045,000 Purina Mills Inc., Sr. Sub. Notes B2 10.25 9/01/03 1,250 1,281,250 ------------ 2,880,000
- -------------------------------------------------------------------------------- See Notes to Financial Statements. 5 Portfolio of Investments as of March 31, 1996 THE HIGH YIELD PLUS FUND, INC. - --------------------------------------------------------------------------------
Moody's Principal Rating Interest Maturity Amount Value Description (Unaudited) Rate Date (000) (Note 1) - ----------------------------------------------------------------------------- - ------------------------------------------------- Gaming--0.7% GB Property Funding Corp., First Mtge. Notes B2 10.875% 1/15/04 $ 750 $ 667,500 - ----------------------------------------------------------------------------- - ------------------------------------------------- Grocery Stores--2.9% Big V Supermarkets, Sr. Sub. Notes, Ser. B B3 11.00 2/15/04 1,750 1,557,500 Brunos Inc., Sr. Sub. Notes B3 10.50 8/01/05 500 480,000 Dominick's Finer Foods, Inc. Sr. Sub. Notes, Ser. B B3 10.875 5/01/05 500 526,250 Eagle Food Centers Inc., Sr. Notes B1 8.625 4/15/00 250 200,000 ------------ 2,763,750 - ----------------------------------------------------------------------------- - ------------------------------------------------- Health Care--3.6% Beverly Enterprises, Sr. Notes B1 9.00 2/15/06 750 712,500 OrNda Healthcorp, Sr. Sub. Notes B2 11.375 8/15/04 1,250 1,406,250 Quorum Health Group Inc., Sr. Sub. Notes B1 8.75 11/01/05 250 251,250 Tenet Healthcare Corp., Sr. Notes Ba1 9.625 9/01/02 325 348,563 Sr. Sub. Notes Ba3 10.125 3/01/05 600 642,000 ------------ 3,360,563 - ----------------------------------------------------------------------------- - ------------------------------------------------- Home Building & Real Estate--2.7% Continental Homes Holdings, Sr. Notes Ba3 12.00 8/01/99 1,000 1,080,000 Del Webb Corp., Sr. Notes Ba3 10.875 3/31/00 500 502,500 Sr. Sub. Deb. B2 9.00 2/15/06 350 336,000 Toll Corp., Sr. Sub. Notes Ba3 10.50 3/15/02 600 630,000 ------------ 2,548,500 - ----------------------------------------------------------------------------- - ------------------------------------------------- Media & Communications--16.2% Arch Communications Group, Inc., Sr. Disc. Notes, Zero Coupon, (until 3/15/01) B3 10.875 3/15/08 1,250 715,625 Chancellor Broadcasting Co., Sr. Sub. Notes B3 9.375 10/01/04 1,000 945,000 Cobb Theaters, Sr. Sec. Notes B2 10.625 3/01/03 250 255,000 EZ Communications Inc., Sr. Sub. Notes B2 9.75 12/01/05 1,000 990,000 Granite Broadcasting Corp., Sr. Sub. Deb. B3 12.75 9/01/02 500 555,000 Sr. Sub. Notes B3 10.375 5/15/05 800 809,000 Sr. Sub. Notes, Ser. A B-* 9.375 12/01/05 380 359,100 Heritage Media Services Inc., Sr. Sec. Notes Ba1 11.00 6/15/02 500 535,000 Infinity Broadcasting Corp., Sr. Sub. Notes Ba3 10.375 3/15/02 250 265,000 MobileMedia Communications, Inc., Sr. Sub. Notes B3 9.375 11/01/07 1,250 1,225,000
- -------------------------------------------------------------------------------- 6 See Notes to Financial Statements. Portfolio of Investments as of March 31, 1996 THE HIGH YIELD PLUS FUND, INC. - --------------------------------------------------------------------------------
Moody's Principal Rating Interest Maturity Amount Value Description (Unaudited) Rate Date (000) (Note 1) - ----------------------------------------------------------------------------- - ------------------------------------------------- Media & Communications (cont'd.) Paging Network, Inc., Sr. Sub. Notes B2 11.75% 5/15/02 $ 500 $ 545,000 Sr. Sub. Notes B2 10.125 8/01/07 375 393,750 Rifkin Acquistion Partners L.P., Sr. Sub. Notes B3 11.125 1/15/06 850 862,750 SFX Broadcasting, Inc., Sr. Sub. Notes B2 11.375 10/01/00 325 351,000 Telefonica de Argentina, S.A., Notes, (Argentina) B1 11.875 11/01/04 1,500D 1,552,500 Turner Broadcasting Systems, Inc., Sr. Deb. Ba2 8.40 2/01/24 1,500 1,386,765 World Color Press, Inc., Sr. Sub. Notes B1 9.125 3/15/03 1,000 1,010,000 Young Broadcasting Inc., Sr. Sub. Notes B2 11.75 11/15/04 1,000 1,090,000 Sr. Sub. Notes, Ser. B B2 10.125 2/15/05 500 505,000 Sr. Sub. Notes B2 9.00 1/15/06 1,000 935,000 ------------ 15,285,490 - ----------------------------------------------------------------------------- - ------------------------------------------------- Metals--6.9% AK Steel Corp., Sr. Notes Ba3 10.75 4/01/04 1,000 1,100,000 Armco, Inc., Sr. Notes B2 9.375 11/01/00 1,750 1,732,500 Bethlehem Steel Corp., Sr. Notes B1 10.375 9/01/03 1,250 1,325,000 Kaiser Aluminum & Chemical Corp., Sr. Notes B1 9.875 2/15/02 350 349,125 Magma Copper Co., Sr. Sub. Notes Baa2 12.00 12/15/01 250 272,835 Weirton Steel Corp., Sr. Notes B2 10.875 10/15/99 750 766,875 Wheeling Pittsburgh Corp., Sr. Notes B1 9.375 11/15/03 1,000 940,000 ------------ 6,486,335 - ----------------------------------------------------------------------------- - ------------------------------------------------- Paper & Packaging--11.2% Aracruz Celulose, S.A., Bonds, (Brazil) NR 9.00 7/22/98 250 D 248,437 Container Corp. of America, Sr. Notes, Ser. B B1 10.75 5/01/02 1,000 1,022,500 Sr. Notes B1 9.75 4/01/03 1,250 1,237,500 Domtar, Inc., Sr. Notes Ba1 11.75 3/15/99 1,500 1,642,500 Fort Howard Paper Corp., Sr. Notes B1 9.25 3/15/01 2,000 2,015,000 Sr. Notes B1 8.25 2/01/02 200 193,000 Sr. Sub. Notes B2 9.00 2/01/06 750 727,500 Rainy River Forest Products, Inc., Sr. Sec. Notes Ba1 10.75 10/15/01 500 537,500 Repap New Brunswick Inc., First Priority, Sr. Sec. Notes Ba3 9.875 7/15/00 750 750,000 Second Priority, Sr. Sec. Notes B2 10.625 4/15/05 750 723,750
- -------------------------------------------------------------------------------- See Notes to Financial Statements. 7 Portfolio of Investments as of March 31, 1996 THE HIGH YIELD PLUS FUND, INC. - --------------------------------------------------------------------------------
Moody's Principal Rating Interest Maturity Amount Value Description (Unaudited) Rate Date (000) (Note 1) - ----------------------------------------------------------------------------- - ------------------------------------------------- Paper & Packaging (cont'd.) Repap Wisconsin Inc., First Priority, Sr. Sec. Notes B1 9.25% 2/01/02 $ 250 $ 239,375 S.D. Warren Co., Sr. Sub. Notes, Ser. B B1 12.00 12/15/04 425 448,375 Stone Container Corp., Sr. Notes B1 11.875 12/01/98 750 783,750 ------------ 10,569,187 - ----------------------------------------------------------------------------- - ------------------------------------------------- Transportation--0.8% Northwest Airlines, Inc., Notes B1 8.625 8/01/96 750 750,000 - ----------------------------------------------------------------------------- - ------------------------------------------------- Utilities--5.0% Cleveland Electric Illuminating Co., First Mtge. Bonds, Ser. B Ba2 9.50 5/15/05 500 503,650 El Paso Electric Co., First Mtge. Bonds, Ser. C Ba3 8.25 2/01/03 300 297,000 First Mtge. Bonds, Ser. D Ba3 8.90 2/01/06 1,295 1,311,188 Long Island Lighting Co., Deb. Ba1 8.90 7/15/19 500 466,885 Midland Funding Corp., Sec. Lease Oblig. Bond, Ser. A B2 11.75 7/23/05 500 527,695 Texas-New Mexico Pwr. Co., Sec. Deb. B1 10.75 9/15/03 1,500 1,605,000 ------------ 4,711,418 ------------ Total corporate bonds (cost $103,125,729) 105,696,103 - ----------------------------------------------------------------------------- - ------------------------------------------------- Foreign Government ObligationsD--2.8% Republic of Argentina, Notes B1 8.375 12/20/03 1,250 1,053,125 Republic of Argentina, Par Bonds B1 4.25 3/31/23 1,000 517,500 Republic of Brazil, Capitalization Bonds B1 8.00 4/15/14 1,082 635,675 Exit Bonds B1 6.00 9/15/13 750 427,500 ------------ Total foreign government obligations (cost $2,565,304) 2,633,800 - ----------------------------------------------------------------------------- - ------------------------------------------------- Shares Common Stocks**--0.2% Triangle Wire & Cable, Inc.# (cost $986,250; purchased 1994) -- -- -- 94,444 141,666 ------------ - ----------------------------------------------------------------------------- - ------------------------------------------------- Preferred Stocks--0.8% BCP Essex Holdings, Ser. A, exchangeable, redeemable, PIK B3 15.00 9/30/04 11,167 284,759 California Federal Bank, noncumulative B2 10.625 -- 4,700 507,600 ------------ Total preferred stocks (cost $763,145) 792,359 ------------ Total long-term investments (cost $107,440,428) 109,263,928
- -------------------------------------------------------------------------------- 8 See Notes to Financial Statements. Portfolio of Investments as of March 31, 1996 THE HIGH YIELD PLUS FUND, INC. - --------------------------------------------------------------------------------
Principal Interest Maturity Amount Value Description Rate Date (000) (Note 1) - ----------------------------------------------------------------------------- - ------------------------------------------------- SHORT-TERM INVESTMENTS--0.3% - ----------------------------------------------------------------------------- - ------------------------------------------------- PaineWebber Inc., Repurchase Agreement, dated 3/29/96, due in the amount of $270,124 (cost $270,000; approximate value of collateral including accrued interest--$283,200) 5.50% 4/01/96 $ 270 $ 270,000 - ----------------------------------------------------------------------------- - ------------------------------------------------- Total Investments--116.4 % (cost $ 107,710,428; Note 3) 109,533,928 Liabilities in excess of other assets--(16.4)% (15,442,653) ------------ Net Assets--100% $ 94,091,275 ------------ ------------
- --------------- * --Standard & Poor's rating. ** --Non-income producing securities. NR --Not rated by Moody's or Standard & Poor's. D --US$ Denominated Foreign Bonds. @ --Consists of bonds with attached stock or warrants. # --Indicates a restricted security; the cost of such security is $986,250. The aggregate value ($141,666) is approximately 0.2% of net assets. PIK --Payment in Kind. - -------------------------------------------------------------------------------- See Notes to Financial Statements. 9 Statement of Assets and Liabilities THE HIGH YIELD PLUS FUND, INC. - --------------------------------------------------------------------------------
Assets March 31, 1996 -------------- Investments, at value (cost $107,710,428).................................................................. $109,533,928 Cash......................................................................... .............................. 1,888 Interest receivable................................................................... ..................... 2,549,679 Receivable for investments sold............................................................................ 1,839,390 Deferred expenses and other assets......................................................................... 96,585 -------------- Total assets....................................................................... ..................... 114,021,470 -------------- Liabilities Loan payable (Note 4)........................................................................... ........... 17,000,000 Payable for investments purchased.................................................................... ...... 1,795,616 Dividends payable...................................................................... .................... 801,963 Loan interest payable (Note 4)............................................................................. 130,415 Accrued expenses..................................................................... ...................... 128,538 Advisory fee payable...................................................................... ................. 40,508 Deferred director's fees......................................................................... .......... 16,952 Administration fee payable...................................................................... ........... 16,203 -------------- Total liabilities.................................................................. ..................... 19,930,195 -------------- Net Assets....................................................................... .......................... $ 94,091,275 -------------- -------------- Net assets were comprised of: Common stock, at par.......................................................................... .......... $ 111,438 Paid-in capital in excess of par........................................................................ 102,367,412 -------------- 102,478,850 Undistributed net investment income..................................................................... 501,189 Accumulated net realized loss on investments............................................................ (10,712,264) Net unrealized appreciation of investments.............................................................. 1,823,500 -------------- Net assets, March 31, 1996......................................................................... ..... $ 94,091,275 -------------- -------------- Net asset value per share ($94,091,275 / 11,143,807 shares of common stock issued and outstanding)......... $8.44 -------------- --------------
- -------------------------------------------------------------------------------- 10 See Notes to Financial Statements. THE HIGH YIELD PLUS FUND, INC. THE HIGH YIELD PLUS FUND, INC. Statement of Operations Statement of Cash Flows - ------------------------------------------------------------ - ------------------------------------------------------------
Year Ended Net Investment Income March 31, 1996 Income Interest................................. $ 11,499,290 Dividends................................ 80,979 -------------- 11,580,269 -------------- Expenses Investment advisory fee.................. 466,661 Administration fee....................... 186,665 Custodian's fees and expenses............ 70,000 Legal fees and expenses.................. 44,000 Transfer agent's fees and expenses....... 38,000 Reports to shareholders.................. 35,000 Insurance expense........................ 31,000 Audit fees and expenses.................. 30,000 Directors fees and expenses.............. 25,000 Miscellaneous............................ 8,816 -------------- Total operating expenses.............. 935,142 Loan interest expense (Note 4)........... 1,195,799 -------------- Total expenses........................ 2,130,941 -------------- Net investment income....................... 9,449,328 -------------- Realized and Unrealized Gain on Investments Net realized gain on investment transactions............................. 757,420 Net change in unrealized appreciation/depreciation of investments.............................. 5,744,996 -------------- Net gain on investments..................... 6,502,416 -------------- Net Increase in Net Assets Resulting from Operations................... $ 15,951,744 -------------- --------------
Year Ended Increase (Decrease) in Cash March 31, 1996 Cash flows provided from operating activities Interest and dividends received (excluding discount amortization of $852,468)....... $ 10,775,758 Operating expenses paid..................... (1,016,664) Loan interest and commitment fee paid....... (1,450,340) Maturities of short-term portfolio investments, net......................... 3,245,000 Purchases of long-term portfolio investments.............................. (63,213,514) Proceeds from disposition of long-term portfolio investments.................... 62,192,660 Deferred expenses and other assets.......... 2,604 -------------- Net cash provided from operating activities............................... 10,535,504 -------------- Cash used for financing activities Net decrease in notes payable............... (2,000,000) Cash dividends paid (excluding reinvestment of dividends of $871,960)................ (8,533,818) -------------- Net cash used for financing activities...... (10,533,818) -------------- Net increase in cash........................ 1,686 Cash at beginning of year................... 202 -------------- Cash at end of year......................... $ 1,888 -------------- -------------- Reconciliation of Net Increase in Net Assets to Net Cash from Operating Activities Net increase in net assets resulting from operations.................................. $ 15,951,744 -------------- Decrease in investments........................ 2,772,253 Net realized gain on investment transactions... (757,420) Net change in unrealized appreciation of investments................................. (5,744,996) Increase in receivable for investments sold.... (1,540,171) Decrease in interest receivable................ 47,957 Decrease in deferred expenses and other assets...................................... 2,604 Increase in payable for investments purchased................................... 139,596 Decrease in accrued expenses and other liabilities................................. (336,063) -------------- Total adjustments........................... (5,416,240) -------------- Net cash provided from operating activities............................... $ 10,535,504 -------------- --------------
- -------------------------------------------------------------------------------- See Notes to Financial Statements. 11 THE HIGH YIELD PLUS FUND, INC. THE HIGH YIELD PLUS FUND, INC. Statement of Changes in Net Assets Notes to Financial Statements - ------------------------------------------------------------ - ------------------------------------------------------------
Year Ended March 31, Increase (Decrease) ------------------------------ in Net Assets 1996 1995 ------------ ------------ Operations Net investment income....... $ 9,449,328 $ 9,564,828 Net realized gain (loss) on investment transactions............. 757,420 (4,961,981) Net change in unrealized appre- ciation/depreciation of investments.............. 5,744,996 (906,562) ------------ ------------ Net increase in net assets resulting from operations............... 15,951,744 3,696,285 Dividends paid to shareholders from net investment income...................... (9,436,822) (9,430,522) Value of Fund shares issued to shareholders in reinvestment of dividends................ 871,960 740,429 ------------ ------------ Total increase (decrease)...... 7,386,882 (4,993,808) Net Assets Beginning of year.............. 86,704,393 91,698,201 ------------ ------------ End of year.................... $ 94,091,275 $ 86,704,393 ------------ ------------ ------------ ------------
The High Yield Plus Fund, Inc. (the ``Fund'') was organized in Maryland on February 3, 1988, as a diversified, closed-end management investment company. The Fund had no transactions until April 4, 1988, when it sold 11,000 shares of common stock for $102,300 to Wellington Management Company (the ``Investment Adviser''). Investment operations commenced on April 22, 1988. The Fund's primary objective is to provide a high level of current income to shareholders through investment in publicly or privately offered high yield debt securities rated in the medium to lower categories by recognized rating services or non-rated securities of comparable quality. As a secondary investment objective, the Fund will seek capital appreciation, but only when consistent with its primary objective. The ability of issuers of debt securities held by the Fund to meet their obligations may be affected by economic developments in a specific industry or region. - ------------------------------------------------------------ Note 1. Accounting Policies The following is a summary of significant accounting policies followed by the Fund in the preparation of its financial statements. Securities Valuation: Portfolio securities that are actively traded in the over-the-counter market, including listed securities for which the primary market is believed to be over-the-counter, are valued at the closing bid price or in the absence of such price, as determined in good faith by the Board of Directors of the Fund. Any security for which the primary market is on an exchange is valued at the last sales price on such exchange on the day of valuation or, if there was no sale on such day, the closing bid price. Short-term securities which mature in more than 60 days are valued at current market quotations. Short-term securities which mature in 60 days or less are valued at amortized cost. In connection with transactions in repurchase agreements with U.S. financial institutions, it is the Fund's policy that its custodian take possession of the underlying collateral securities, the value of which exceeds the principal amount of the repurchase transaction including accrued interest. If the seller defaults, and the value of the collateral declines or if bankruptcy proceedings are commenced with respect to the seller of the security, realization of the collateral by the Fund may be delayed or limited. Cash Flow Information: The Fund invests in securities and pays dividends from net investment income and distributions from net realized gains which are paid in cash or are reinvested at the discretion of shareholders. These activities are reported in the Statement of Changes in Net Assets and additional information on cash receipts and cash payments is - -------------------------------------------------------------------------------- 12 See Notes to Financial Statements Notes to Financial Statements THE HIGH YIELD PLUS FUND, INC. - ------------------------------------------------------------------------------- presented in the Statement of Cash Flows. Accounting practices that do not affect reporting activities on a cash basis include carrying investments at value and amortizing discounts on debt obligations. Cash, as used in the Statement of Cash Flows, is the amount reported as ``Cash'' in the Statement of Assets and Liabilities. Securities Transactions and Net Investment Income: Security transactions are recorded on the trade date. Realized gains and losses from securities transactions are calculated on the identified cost basis. Interest income, which is comprised of three elements; stated coupon rate, original issue discount and market discount, is recorded on an accrual basis. Dividend income is recorded on the ex-dividend date. Expenses are recorded on the accrual basis which may require the use of certain estimates by management. Federal Income Taxes: It is the Fund's policy to continue to meet the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its taxable income to shareholders. Therefore, no federal income tax provision is required. Dividends and Distributions: The Fund expects to declare and pay dividends of net investment income monthly and make distributions at least annually of any net capital gains. Dividends and distributions are recorded on the ex-dividend date. Income distributions and capital gain distributions are determined in accordance with income tax regulations which may differ from generally accepted accounting principles. - ------------------------------------------------------------ Note 2. Agreements The Fund has agreements with the Investment Adviser and with Prudential Mutual Fund Management, Inc. (the ``Administrator''). The Investment Adviser makes investment decisions on behalf of the Fund; the Administrator provides occupancy and certain clerical and accounting services to the Fund. The Fund bears all other costs and expenses. The investment advisory agreement provides for the Investment Adviser to receive a fee, computed weekly and payable monthly at an annual rate of .50% of the Fund's average weekly net assets. The administration agreement provides for the Administrator to receive a fee, computed weekly and payable monthly at an annual rate of .20% of the Fund's average weekly net assets. Note 3. Portfolio Securities Purchases and sales of investment securities, other than short-term investments, for the year ended March 31, 1996, aggregated $63,353,110 and $63,732,831, respectively. During the year ended March 31, 1996, the Fund entered into $3,050,777 of securities transactions on a principal basis with Prudential Securities Incorporated, an affiliate of the Administrator. The cost basis of investments for federal income tax purposes was substantially the same as for financial reporting purposes and, accordingly, as of March 31, 1996, net unrealized appreciation for federal income tax purposes was $1,823,500 (gross unrealized appreciation--$3,829,820; gross unrealized depreciation--$2,006,320). For federal income tax purposes, the Fund has a capital loss carryforward as of March 31, 1996 of approximately $10,712,000 of which $6,507,000 expires in 2000, $2,399,000 expires in 2001 and $1,806,000 expires in 2004. Accordingly, no capital gains distributions are expected to be paid to shareholders until net gains have been realized in excess of such carryforward. - ------------------------------------------------------------ Note 4. Borrowings The Fund has a credit agreement with an unaffiliated lender. The maximum commitment under this agreement is $30,000,000. Interest on any such borrowings is based on market rates and is payable at maturity. The average daily balance outstanding during the year ended March 31, 1996 was $16,095,628 at a weighted average interest rate of 7.43%. The maximum face amount of borrowings outstanding at any month end during the year ended March 31, 1996 was $20,000,000. The current borrowings of $17,000,000 (at a weighted average interest rate of 6.48%) mature throughout the period from April 8, 1996 to August 30, 1996. The Fund has paid commitment fees at an annual rate of .25 of 1% on any unused portion of the credit facility. Commitment fees are included in ``Loan Interest'' as reported on the Statement of Assets and Liabilities and on the Statement of Operations. - ------------------------------------------------------------------------------- 13 Notes to Financial Statements THE HIGH YIELD PLUS FUND, INC. - ------------------------------------------------------------------------------- Note 5. Capital There are 100 million shares of $.01 par value common stock authorized. During the fiscal years ended March 31, 1996 and March 31, 1995, the Fund issued 104,367 and 92,154 shares in connection with reinvestment of dividends, respectively. - ------------------------------------------------------------ Note 6. Dividends On April 15, 1996 the Board of Directors of the Fund declared a dividend of $0.07 per share payable on May 10, 1996, to shareholders of record on April 30, 1996. - -------------------------------------------------------------------------------- 14 Financial Highlights THE HIGH YIELD PLUS FUND, INC. - -------------------------------------------------------------------------------
Year Ended March 31, - ------------------------------------------------------- 1996 1995 1994 1993 1992 ------- ------- ------- ------- ------- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of year.................. $ 7.85 $ 8.38 $ 8.48 $ 7.91 $ 6.80 ------- ------- ------- ------- ------- Income from investment operations Net investment income............................... .84 .87 .90 .89 .87 Net realized and unrealized gain (loss) on investments...................................... .59 (.54) (.15) .52 1.11 ------- ------- ------- ------- ------- Total from investment operations................. 1.43 .33 .75 1.41 1.98 ------- ------- ------- ------- ------- Less dividends and distributions Dividends from net investment income................ (.84) (.86) (.85) (.84) (.87) Distributions in excess of net investment income.... -- -- -- -- -- ------- ------- ------- ------- ------- Total dividends and distributions................ (.84) (.86) (.85) (.84) (.87) ------- ------- ------- ------- ------- Net asset value, end of year(a)..................... $ 8.44 $ 7.85 $ 8.38 $ 8.48 $ 7.91 ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- Market price per share, end of year(a).............. $ 8.75 $ 8.00 $ 8.375 $ 8.875 $ 7.75 ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- TOTAL INVESTMENT RETURN(b):......................... 20.80% 6.33% 3.90% 27.02% 34.28% ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- RATIO/SUPPLEMENTAL DATA: Net assets, end of year (000 omitted)............... $94,091 $86,704 $91,698 $92,422 $85,742 Average net assets (000 omitted).................... $92,855 $87,734 $96,962 $88,142 $80,703 Ratio to average net assets: Expenses, before loan interest, commitment fees and nonrecurring expenses..................... 1.01% 1.11% 1.12% 1.20% 1.28% Total expenses................................... 2.29% 2.71% 2.01% 2.03% 2.26% Net investment income............................ 10.18% 10.90% 10.15% 10.94% 11.69% Portfolio turnover rate............................. 60% 47% 100% 82% 46% Total debt outstanding at end of year (000 omitted)......................................... $17,000 $19,000 $28,000 $15,000 $15,000 Asset coverage per $1,000 of debt outstanding....... $ 6,535 $ 5,563 $ 4,275 $ 7,161 $ 6,716
- --------------- (a) NAV and market value are published in The Wall Street Journal each Monday. (b) Total investment return is calculated assuming a purchase of common stock at the current market value on the first day and a sale at the current market value on the last day of each year reported. Dividends and distributions are assumed for purposes of this calculation to be reinvested at prices obtained under the dividend reinvestment plan. This calculation does not reflect brokerage commissions. Contained above is selected data for a share of common stock outstanding, total investment return, ratios to average net assets and other supplemental data for the years indicated. This information has been determined based upon information provided in the financial statements and market price data for the Fund's shares. - -------------------------------------------------------------------------------- See Notes to Financial Statements. 15 Independent Auditors' Report THE HIGH YIELD PLUS FUND, INC. - ------------------------------------------------------------------------------- The Shareholders and Board of Directors The High Yield Plus Fund, Inc.: We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of The High Yield Plus Fund, Inc. as of March 31, 1996, the related statements of operations and of cash flows for the year then ended and of changes in net assets for each of the years in the two year period then ended, and the financial highlights for each of the years in the five year period then ended. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of the securities owned as of March 31, 1996, by correspondence with the custodian and brokers; where replies were not received from brokers, we performed other auditing procedures. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such financial statements and financial highlights present fairly, in all material respects, the financial position of The High Yield Plus Fund, Inc. as of March 31, 1996, the results of its operations, its cash flows, the changes in its net assets and its financial highlights for the respective stated periods in conformity with generally accepted accounting principles. DELOITTE & TOUCHE LLP New York, New York May 9, 1996 Federal Income Tax Information THE HIGH YIELD PLUS FUND, INC. - ------------------------------------------------------------------------------- We are required by the Internal Revenue Code to advise you within 60 days of the Fund's fiscal year end (March 31, 1996) that 0.97% of the dividends paid in the fiscal year ended March 31, 1996 qualified for the corporate dividends received deduction available to corporate taxpayers. - ------------------------------------------------------------------------------- 16 Supplemental Proxy Information THE HIGH YIELD PLUS FUND, INC. - ------------------------------------------------------------------------------- The Annual Meeting of Shareholders of The High Yield Plus Fund, Inc. (The ``Fund'') was held on July 31, 1995 at the offices of Prudential Securities Incorporated, One Seaport Plaza, New York, New York. The meeting was held for the following purposes: (1) To elect the following director to serve as follows: Director Class Term Expiring ---------------------- ------ -------- --------- Daniel S. Ahearn I 3 years 1998 Directors whose term of office continued beyond this meeting are Edward D. Beach, Thomas T. Mooney and Robin B. Smith. (2) To ratify the selection of Deloitte & Touche LLP as independent public accountants for the year ending March 31, 1996. (3) To transact such other business as may properly come before the meeting or any adjournment thereof. The results of the proxy solicitation on the above matters were as follows:
Director/Auditor Votes for Votes against Votes withheld Abstentions ------------------------ ---------- -------------- - --------------- ------------ (1) Daniel S. Ahearn 8,862,409 -- 135,239 -- (2) Deloitte & Touche LLP 8,885,332 44,117 - -- 132,999 (3) There was no other business voted upon at the Annual Meeting of Shareholders.
- -------------------------------------------------------------------------------- 17 Other Information THE HIGH YIELD PLUS FUND, INC. - ------------------------------------------------------------------------------- Dividend Reinvestment Plan. Shareholders may elect to have all distributions of dividends and capital gains automatically reinvested in Fund shares (Shares) pursuant to the Fund's Dividend Reinvestment Plan (the Plan). Shareholders who do not participate in the Plan will receive all distributions in cash paid by check in United States dollars mailed directly to the shareholders of record (or if the shares are held in street or other nominee name, then to the nominee) by the custodian, as dividend disbursing agent. Shareholders who wish to participate in the Plan should contact the Fund at (800) 451-6788. State Street Bank and Trust Co. (the Plan Agent) serves as agent for the shareholders in administering the Plan. After the Fund declares a dividend or capital gains distribution, if (1) the market price is lower than net asset value, the participants in the Plan will receive the equivalent in Shares valued at the market price determined as of the time of purchase (generally, following the payment date of the dividend or distribution); or if (2) the market price of Shares on the payment date of the dividend or distribution is equal to or exceeds their net asset value, participants will be issued Shares at the higher of net asset value or 95% of the market price. If net asset value exceeds the market price of Shares on the valuation date or the Fund declares a dividend or other distribution payable only in cash, the Plan Agent will, as agent for the participants, receive the cash payment and use it to buy Shares in the open market. If, before the Plan Agent has completed its purchases, the market price exceeds the net asset value per share, the average per share purchase price paid by the Plan Agent may exceed the net asset value per share, resulting in the acquisition of fewer shares than if the dividend or distribution had been paid in shares issued by the Fund. The Fund will not issue Shares under the Plan below net asset value. There is no charge to participants for reinvesting dividends or capital gain distributions, except for certain brokerage commissions, as described below. The Plan Agent's fees for the handling of the reinvestment of dividends and distributions will be paid by the Fund. There will be no brokerage commissions charged with respect to shares issued directly by the Fund. However, each participant will pay a pro rata share of brokerage commissions incurred with respect to the Plan Agent's open market purchases in connection with the reinvestment of dividends and distributions. The automatic reinvestment of dividends and distributions will not relieve participants of any federal income tax that may be payable on such dividends or distributions. The Fund reserves the right to amend or terminate the Plan upon 90 days' written notice to shareholders of the Fund. Participants in the Plan may withdraw from the Plan upon written notice to the Plan Agent and will receive certificates for whole Shares and cash for fractional Shares. All correspondence concerning the Plan should be directed to the Plan Agent, State Street Bank & Trust Company, P.O. Box 8200, Boston, MA 02266-8200. - ------------------------------------------------------------------------------- 18 Directors Edward D. Beach Eugene C. Dorsey Thomas T. Mooney Robin B. Smith Investment Adviser Wellington Management Company 75 State Street Boston, MA 02109 Administrator Prudential Mutual Fund Management, Inc. One Seaport Plaza New York, NY 10292 Custodian and Transfer Agent State Street Bank and Trust Company One Heritage Drive North Quincy, MA 02171 Independent Auditors Deloitte & Touche LLP Two World Financial Center New York, NY 10281 Legal Counsel Kirkpatrick & Lockhart LLP 1800 Massachusetts Avenue, N.W. Washington, D.C. 20036 Notice is hereby given in accordance with Section 23(c) of the Investment Company Act of 1940 that the Fund may purchase, from time to time, shares of its common stock at market prices. The views expressed in this report and the information about the Fund's portfolio holdings are for the period covered by this report and are subject to change thereafter. This report is for stockholder information. This is not a prospectus intended for use in the purchase or sale of Fund shares. The High Yield Plus Fund, Inc. One Seaport Plaza New York, NY 10292 For information call toll-free (800) 451-6788 429906100 -----END PRIVACY-ENHANCED MESSAGE-----